- Annual benefit
- $43,200
- Estimated annual premium
- $881
- Estimated monthly premium
- $73.44
- Premium as % of benefit amount
- 2.04%
- Emergency fund for the waiting period
- $16,800
Individual-policy benefits are usually received tax-free, so 60% of gross income approximates normal take-home pay. Employer-paid cover is taxable, so its effective replacement is lower.
Sizing the benefit
Individual disability policies replace roughly 60 to 70% of gross income, deliberately below your take-home so there is still an incentive to return to work. If you pay your own premiums the benefit is generally tax-free, which is why 60% of gross can look close to your normal net pay. Employer-paid cover is taxable, so the effective replacement drops substantially.
Elimination period
This is the waiting period before benefits start, and it is the single biggest lever on price. 90 days is common, but you need enough savings to bridge it: we show the emergency fund that implies from your essential monthly spending.
Premium estimate
Individual policies commonly cost 1.5 to 5% of the annual benefit amount, rising with age and occupational risk and higher for women. We start from about 2.4% at 35 for a white-collar male with a 90-day wait to age 65, then adjust for each of those factors.
Frequently asked questions
Why replace only 60% of income?
Insurers cap benefits so that working pays more than not working. Because individual-policy benefits are usually tax-free, 60% of gross income lands close to your normal after-tax pay.
How long an elimination period should I choose?
Long enough that you can genuinely afford it. Moving from 90 to 180 days cuts the premium by roughly 18%, but only worth it if your emergency fund covers six months of essentials.
Do I still need this if my employer offers cover?
Often yes. Group policies usually cap benefits around 60% of pay, are taxable, may exclude your own occupation, and end when you change jobs — rarely enough on its own.